Capped at 1% a year, with a sub-cap of 0.25% for pure service fees, the charge is embedded in the expense ratio rather than billed. Existing shareholders therefore fund the cost of attracting new ones.
The original rationale was that growing assets would spread fixed costs and lower expense ratios over time. Evidence for that has been thin, and the fee has repeatedly drawn regulatory attention, particularly where a firm placed clients in a 12b-1 paying class when a cheaper class of the identical fund was available.
Check the class first. Two lines of the same fund can differ by 0.75% a year on this item alone. See share-class-portfolio and fiduciary-duty.
Related: no-load-fund, fiduciary-duty, total-expense-ratio, front-end-load, sec